This article is the result of research aiming to quantify the association of macroeconomic
factors and the risk of consumer loan default. Data at a medium level of aggregation was
used to describe the consumer loan portfolio of one of Poland’s largest commercial banks
during the period of 2004–2016. The sample consisted of more than 10,000 observations,
describing cohorts of loans disbursed in the successive months of the period. The relations
were investigated with the use of panel data models. The approach applied in modelling
allows to better isolate the effect of the macroeconomic environment from other key factors
determining credit risk, i.e. historic changes in the bank’s lending policy and the natural
maturation process of the portfolio. The results confirm the interrelation of credit risk and
the economic situation, represented in the model by the unemployment rate and industrial
production. An increase in the unemployment rate is associated with the increase the
default frequency, while greater dynamics of industrial production works in the opposite
direction. Lags of up to 12 months were detected in this relationship. However, the connection
of interest rates has not been confirmed.
The presented model along with widely available macroeconomic forecasts and stress scenarios
allows for more accurate prediction of portfolio deterioration during downturns.
This will enable formulation of recommendations for bank lending policy during different
phases of the business cycle.